Submission to:
Productivity Commission
Title:
Business set-up, transfer and closure
Date:
20 February 2015
Minter Ellison Building, 25 National Circuit, Forrest ACT 2603
P 02 6253 6900 F 02 6253 6999 E ata@truck.net.au W www.truck.net.au
AUSTRALIAN TRUCKING ASSOCIATION
Contents
1.
Australian Trucking Association ........................................................................................................... 3
2.
Summary of recommendations .............................................................................................................. 3
3.
Introduction .............................................................................................................................................. 4
4.
Overview of the heavy vehicle industry ................................................................................................ 5
5.
An overview of issues identified by the industry ................................................................................. 5
6.
What the Government needs to do to address the issues .................................................................. 7
6.1 Increase the small business turnover threshold to $3 million ......................................................... 7
6.2 Review the efficiency of Payroll tax ................................................................................................ 7
6.3 Remove stamp duty on purchases and replace it with a broader tax ............................................ 8
6.4 Remove red tape for individuals wanting to start a business ......................................................... 8
6.5 Simplify Business Activity Statements compliance for industry ..................................................... 9
6.6 Improve business transfer tax arrangements ................................................................................. 9
6.7 Improve transparency for business access to finance ................................................................. 12
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1. Australian Trucking Association
The ATA is the peak body that represents the trucking industry. Its members include state and
sector-based trucking associations, some of the nation’s largest transport companies, and
businesses with leading expertise in truck technology.
2. Summary of recommendations
Recommendation 1
The small business turnover threshold should be increased to $3 million. The feasibility of an
increase to $5 million should be investigated.
Recommendation 2
Payroll tax rates should be harmonised across jurisdictions and a central administrator should
process the tax.
Recommendation 3
The Productivity Commission should investigate further the effect of stamp duty on business and
recommend ways to alleviate the effect of stamp duties on business growth.
Recommendation 4
Australian Business Number (ABN) arrangements should be amended to allow individuals to
register for an ABN with the intent of carrying out an enterprise.
Recommendation 5
The ATO should investigate simplifying business activity statements (BAS).
Recommendation 6
The Productivity Commission should investigate the Board of Taxation’s review of Division 7A in
order to allow family trusts to allocate funds in an efficient manner.
Recommendation 7
Capital gains tax should not be levied on business ownership transfers within families.
Recommendation 8
The Code of Banking Practice and the Mutual Banking Code of Practice should be amended so
there is a standardised notice period for notifying business borrowers of changes to loan terms and
conditions.
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AUSTRALIAN TRUCKING ASSOCIATION
3. Introduction
Australia is a nation of entrepreneurs, being second only to the USA in terms of entrepreneurship
rate.1 In 2011 the Global Entrepreneurship Monitor found:
 10.5 per cent of the Australian adult population were actively engaged in starting and
running new businesses.
 33 per cent or 580,000 expected to create at least five new jobs in the next five years.
 11 per cent or 170,000 expected to create 20 or more new jobs in the next five years.
 Australia was one of only three developed countries, together with the US and the
Netherlands, that ranked above average for both entrepreneurship rate and employee
entrepreneurial activity
 Approximately 50 per cent of Australians believe that good opportunities exist for the
establishment of new ventures, and that they possess the skills to start a business. This is
well above international averages.
 Australian entrepreneurship is comparatively inclusive. For example, at 8.4 per cent female
total entrepreneurial activity is second only to the USA.2
However, while Australia’s level of entrepreneurship is high in international terms there are still
barriers to starting, growing, transferring and closing businesses. The global financial crisis
effected business confidence and altered financial lending terms. The most recent Australian
Chamber of Commerce and Industry Small Business Survey and Business Expectations Survey
show a deteriorating position for business outcomes.
Small business is significantly affected by compliance costs. The scoping study of small business
tax compliance costs, published in 2007, highlighted a number of findings:

Compliance costs effect small businesses to a much greater extent than large businesses
and are not just financial.

The small business sector is extremely diverse, and compliance costs vary based on a
range of factors including size, turnover, business structure, staffing levels, industry sector,
the skills and expertise of the proprietors, and accounting systems in place.

Increased compliance costs are attributable to a range of factors including inconsistent or
different legal rules operating across different jurisdictional legal systems, use of tax
systems by government to achieve social and other broader policy objectives, concessions
and thresholds, and changes to tax law.

Complying with capital gains tax, fringe benefits tax, business activity statement
requirements and managing intergenerational transfers of business assets present
particular complexity. Even though risks are similar across the spectrum of businesses,
smaller businesses have much greater vulnerability to risk and uncertainty. The regulations
tend to select for larger businesses and do not account for skewed risk vulnerabilities.

There is no single or precise aspect of the tax system driving the tax compliance concerns
perceived by small business. Rather, a myriad of regulations from local governments to the
Australian Government appear to be the problem.3
1
Global Entrepreneurship Monitor, National Entrepreneurial Assessment for Australia 2011, accessible at:
http://www.gemconsortium.org/docs/download/2414, Page 2
2
Global Entrepreneurship Monitor, National Entrepreneurial Assessment for Australia 2011, accessible at:
http://www.gemconsortium.org/docs/download/2414, Page 2
3
Board of Taxation, Scoping study of small business tax compliance costs A report to the Treasurer, December 2007, accessible at:
http://www.taxboard.gov.au/content/reviews_and_consultations/small_business_tax_compliance_costs/scoping_study_report/download
s/small_business_tax_compliance_costs_scoping_study.pdf Page 12
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AUSTRALIAN TRUCKING ASSOCIATION
The Government’s small business policy agenda includes reducing red tape, improving the
business operating environment and increasing the quality and effectiveness of government
engagement with small business. This is designed to increase the number of small business
start-ups, encourage entrepreneurial behaviour, drive economic growth, and improve productivity
and competitiveness.4
In this context, the Productivity Commission investigation into issues surrounding business startup, transfer and closure needs to provide tangible recommendations to support Australia’s
entrepreneurial spirit.
This submission will deal strictly with broader business regulation issues. The ATA is dealing with
specific industry issues through the appropriate forums such as the National Heavy Vehicle
Regulator and the National Transport Commission.
4. Overview of the heavy vehicle industry
The heavy vehicle industry is a significant contributor to economic activity, generating direct as well
as flow on activity through its support to a diverse range of industries and supply chains. The road
transport industry added over $18 billion to the Australian economy in FY2012 or 1.4 per cent of
Gross Domestic Product. 5
While the heavy vehicle industry is a significant contributor to the national economy, the industry is
mainly populated with small businesses, with 72 per cent of operators owning one truck and only
one per cent of operators owning more than ten trucks. Unnecessary costs and unjustified
restrictions on productivity of trucking businesses simply burdens the economy and constrains
growth. 6
The heavy vehicle industry comprises more than 50,000 specialised road freight businesses and
employs over 180,000 people.7
Many trucking businesses are traditional family businesses.
5. An overview of issues identified by the industry
In order to understand industry’s experience the ATA created a survey and sent it to operators in
order to gauge issues relevant to the investigation. Overall 21 operators responded to the survey
and provided valuable qualitative insights into their concerns8. The operator sample provided a
good mix of business size, establishment times and operating sectors and areas. Issues that were
raised as concerns have been illustrated below.
The industry is under pressure from both industry specific regulations and general planning
regulations
Operators identified a range of cost impediments that governments had allowed to spiral.
4
Board of Taxation, Review of Tax Impediments Facing Small Business A Report to the Government, August 2014, accessible at:
http://taxboard.gov.au/content/reviews_and_consultations/impediments_facing_small_business/report/downloads/taximpediments_repor
t.pdf Page 19
5
PricewaterhouseCoopers, A future strategy for road supply and charging in Australia, 2013, accessible at: www.truck.net.au/industryresources/future-strategy-road-supply-and-charging-australia ,Page 12
6
PricewaterhouseCoopers, A future strategy for road supply and charging in Australia, 2013, accessible at: www.truck.net.au/industryresources/future-strategy-road-supply-and-charging-australia ,Page 18
7
PricewaterhouseCoopers, A future strategy for road supply and charging in Australia, 2013, accessible at: www.truck.net.au/industryresources/future-strategy-road-supply-and-charging-australia ,Page 12
8
The survey sample was self-selected and so formal statistical methods cannot be applied to the results.
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AUSTRALIAN TRUCKING ASSOCIATION
For example:
 payroll tax (discourages employment),
 land tax ( high cost for depots, and depots are a necessity),
 stamp duties on registration (a penalty for buying a new piece of equipment).
Both large and small businesses cited paperwork as an issue regardless of size.
The imposition of stamp duty on the registration of heavy vehicles is a financial drain on operators.
One operator cited the removal of stamp duty on new trailers as a positive outcome for businesses
setting up. Generally, operators stated there was too much red tape and compliance that made
setting up a business difficult.
Some operators experience barriers to the sale or transfer of business
One operator noted that it is difficult for small to medium businesses to transfer the business to a
family member or a new management team. They note the problem of transferring businesses as a
reason why many companies close or are sold to a public company which can limit competition in
the industry.
Another operator stated that there can be disruptions to sale with the previous owner of the
business reneging on terms of the contract and it being cost prohibitive for a six month old
company to go to court.
One area that is affecting the viability of trucking businesses is payment terms in contracts.
The majority of respondents stated that contracts are prepared by the client. Followed by contracts
being prepared by the operator, followed by negation then finally followed by a standard form
prepared by a third party.
In a question about the viability of a business being affected by the length of time it takes for an
invoice to be paid. Many reported that the 28-30 day window when they normally received payment
was ‘painful’, others report 45 days to 3 months. One operator stated even if you put 14 days on
the invoice payment is still no quicker. Operators are also expected to pay upfront for fuel,
vehicles, vehicle maintenance and other fees and the delayed payment stresses cash flow and
operator’s obligations.
Operators suggested that having a standard contract with a maximum length for payments and
legal penalties for not paying on time, pre-payment and electronic point of delivery systems would
improve the current system.
It has become harder to access finance for start-ups.
While operators stated that industry needs to be aware of the cost of tyres and vehicle
maintenance if businesses want to be successful, they did raise concerns about the availability and
terms of lending.
The industry operates on tight profit margins and operators said that no one wants to lend out
money when starting up. Additionally, operators said the need to have a guarantor with clout can
be hard to find for someone starting out. One operator felt that multi-nationals had less problems in
accessing finance than small fleet sole traders.
Operators also stated that the reporting requirements banks expect can also be onerous when
starting out.
Paying off an asset is difficult with accessing finance as operators cannot move forward replacing
equipment requires cash – no one wants to drive aging equipment.
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AUSTRALIAN TRUCKING ASSOCIATION
6. What the Government needs to do to address the issues
Small businesses are unduly burdened by paperwork and tax compliance. Small businesses are
eligible for concessions. There are a range of actions the government can do to support
entrepreneurial activities by removing red tape and excess compliance for small business.
6.1 Increase the small business turnover threshold to $3 million
Small businesses receive tax concessions and additional help in completing their tax
responsibilities. However, the current small business turnover threshold of $2 million (excluding
GST) does not fully capture businesses that should be classified as ‘small’.
A trucking company can have turnover of more than $2 million; yet it may employ fewer than 20
workers. The amount of turnover is considerable but the resources available to complete tax
administration, including business activity statements, superannuation payments and other tax
responsibilities may not be sophisticated.
In Australia's Future Tax System (AFTS) review published in 2009 it was recommended that the
small business turnover threshold be increased from $2 million to $5 million. This year the Board of
Taxation released a review of tax impediments facing small business report that reiterated the
point that the $2 million turnover threshold for small business is out of date. Stakeholders also
recommended that the turnover threshold could be indexed by CPI. The Board recommended the
threshold be increased to $3 million as this would achieve a reasonable balance and provide a
degree of future proofing. The Board also recommended that there should be further investigation
of the feasibility of an increase to $5 million.
Recommendation 1
The small business turnover threshold should be increased to $3 million. The feasibility of an
increase to $5 million should be investigated.
6.2 Review the efficiency of Payroll tax
Payroll tax continues to be controversial and is seen as an impediment to the growth of business
activities. The jurisdictional differences in the payroll tax rate is a nuisance for businesses who
operate in multiple states as well.
In AFTS it was recommended that state payroll taxes should eventually be replaced with revenue
from more efficient broad-based taxes.9
In the review of Tax Impediments Facing Small Business stakeholders said ‘payroll tax is a
significant handbrake on small businesses employing more people that will trigger a payroll tax
liability.’10
Many stakeholders in the Board of Taxation report proposed a range of actions to improve payroll
tax, including it being abolished and monies being recovered through broadening of the GST base.
Broadening the GST is outside the scope of this submission, but a good strep forward would be to
harmonise rates and thresholds, and having one central administrator for payroll tax. This could be
a role for the Australian Tax Office (ATO).11
9
Australian Government Australia's Future Tax System: Final Report, 2009, Recommendation 55.
Board of Taxation, Review of Tax Impediments Facing Small Business A Report to the Government, August 2014, accessible at:
http://taxboard.gov.au/content/reviews_and_consultations/impediments_facing_small_business/report/downloads/taximpediments_repor
t.pdf Page 72
11
Board of Taxation, Review of Tax Impediments Facing Small Business A Report to the Government, August 2014, accessible at:
http://taxboard.gov.au/content/reviews_and_consultations/impediments_facing_small_business/report/downloads/taximpediments_repor
t.pdf, Page 73
10
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AUSTRALIAN TRUCKING ASSOCIATION
Recommendation 2
Payroll tax rates should be harmonised across jurisdictions and a central administrator should
process the tax.
6.3 Remove stamp duty on purchases and replace it with a broader tax
Stamp duty is charged on a range of transactions such as insurance, property transfer and heavy
vehicle purchases.
Stamp duty along with payroll tax is an inefficient tax that does not seek to recover a certain cost
only revenue raise and inhibits growth of businesses. The AFTS review recommended that stamp
duty be replaced with a more efficient and equitable tax. As stated in the operator survey
responses, the removal of stamp duty on new trailers was seen as supporting businesses.
However, the continuation of stamp duty on other new and used vehicles is a considerable sum for
operators to provide and may stop operators updating their fleets.
Recommendation 3
The Productivity Commission should investigate further the effect of stamp duty on business and
recommend ways to alleviate the effect of stamp duties on business growth.
6.4 Remove red tape for individuals wanting to start a business
The first step for individuals wishing to start a business is to obtain an Australian Business Number
(ABN). However, the Board of Taxation stated that ‘the difficulty for some small businesses in
obtaining an ABN can be a barrier for small business when they are most vulnerable in the start in
phase. This can have significant ramifications such as not being able to obtain a business name,
being ineligible to obtain business inputs at wholesale prices and being unable to claim input tax
credits.12
Essentially, individuals cannot obtain an ABN unless they are carrying on an enterprise or have
taken significant steps to commence one, such as signing contracts, issuing invoices or purchasing
equipment. In many cases, though, an individual cannot do these things without already holding an
ABN.
The Board recommended that there may be opportunities to relax the ABN registration process
requirements for individuals and partnerships by allowing individuals to simply state their intent to
carry out an enterprise to become eligible for an ABN. The Board also recommended that the ATO
provide a hotline so that when an application has to be issued in circumstances where it is
important to the applicant it be issued urgently, or is rejected, there is access to the ATO for
assistance.13 These actions should reduce the red tape and give support to individuals seeking to
set up a business.
Recommendation 4
Australian Business Number (ABN) arrangements should be amended to allow individuals to
register for an ABN with the intent of carrying out an enterprise
12
Board of Taxation, Review of Tax Impediments Facing Small Business A Report to the Government, August 2014, accessible at:
http://taxboard.gov.au/content/reviews_and_consultations/impediments_facing_small_business/report/downloads/taximpediments_repor
t.pdfPage 18
13
Board of Taxation, Review of Tax Impediments Facing Small Business A Report to the Government, August 2014, accessible at:
http://taxboard.gov.au/content/reviews_and_consultations/impediments_facing_small_business/report/downloads/taximpediments_repor
t.pdfPage 19
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AUSTRALIAN TRUCKING ASSOCIATION
6.5 Simplify Business Activity Statements compliance for industry
Businesses have the choice to lodge business activity statements (BAS) monthly, quarterly or
annually. However, a long running concern is the complexity of the BAS, which includes details of
businesses GST, PAYG instalments, PAYG withholding, and fringe tax benefits. With many small
businesses having to self-declare the forms there needs to be efforts made by the ATO to guide
small businesses through the process and possibly review removing some labels or providing
bespoke BAS forms to certain sectors and industries. BAS forms are particularly important to
trucking businesses because they used these forms to claim fuel tax credits.
Stakeholders to the Board of Taxation report stated the BAS is the most time consuming tax
compliance requirement for small business.14
The Board recommended that the ATO and its relevant advisory groups review whether the
quarterly reporting obligations for small business could be significantly simplified.15 The ATA
supports this move to simplify tax reporting requirements for small businesses.
Recommendation 5
Investigate simplifying business activity statements (BAS).
6.6 Improve business transfer tax arrangements
As many trucking businesses are owned and run by families a natural progression for the business
is for it be managed by the offspring of the owner and some estimates state that family businesses
account for 70 per cent of all Australian businesses.16 However, as indicated in the operator survey
responses there are difficulties in transferring businesses to family members.
Family arrangements such as succession planning have become essential given many operators
are reaching retirement age. However, tax arrangements limit the viability of transferring
businesses.
Family trusts
Family trusts are used for various reasons including asset protection, assisting the business to
manage succession and related estate planning issues, and providing a mechanism to retain
control of the business within the family unit.17
14
Board of Taxation, Review of Tax Impediments Facing Small Business A Report to the Government, August 2014, accessible at:
http://taxboard.gov.au/content/reviews_and_consultations/impediments_facing_small_business/report/downloads/taximpediments_repor
t.pdf Page 25
15
Board of Taxation, Review of Tax Impediments Facing Small Business A Report to the Government, August 2014, accessible at:
http://taxboard.gov.au/content/reviews_and_consultations/impediments_facing_small_business/report/downloads/taximpediments_repor
t.pdfPage 26
16
Parliamentary Joint Committee on corporations and financial services, Family Businesses in Australia – different and significant: why
they shouldn’t be overlooked, March 2013, accessible at:
http://www.aph.gov.au/~/media/wopapub/senate/committee/corporations_ctte/completed_inquiries/2010_13/fam_bus/report/report_pdf.a
shx, Page Xiii
17
Parliamentary Joint Committee on corporations and financial services, Family Businesses in Australia – different and significant: why
they shouldn’t be overlooked, March 2013, accessible at:
http://www.aph.gov.au/~/media/wopapub/senate/committee/corporations_ctte/completed_inquiries/2010_13/fam_bus/report/report_pdf.a
shx, Page 127
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AUSTRALIAN TRUCKING ASSOCIATION
However, current state and Commonwealth arrangements are affecting the ease of family trusts. In
2013, the Parliamentary Joint Committee on Corporations and Financial Services concluded:
In particular, family businesses reported that the requirements in Division 6
and Division 7A of the Income Tax Assessment Act 1936 do not
appropriately recognise the operational structures of family businesses
which can include multiple private commercial enterprises. Australia's
taxation requirements should achieve an appropriate balance between
supporting businesses and maintaining the integrity of Australia's taxation
system. There is some evidence that at present Division 6 and Division 7A
may not be achieving this balance.18
The most common application of Division 7A is to allow loans to be made from a company to a
related party and this requires shareholders and associates to support a ‘complying loan
agreement’ which sets out minimum repayment terms around the loan.19 While it is a complex
regime, many small businesses who operate under trusts use it as a means of paying themselves
a living wage with agreed repayments with the interest rate set by the ATO.
In the recent Board of Taxation review stakeholders stated that the impact of Division 7A on small
business was complex, not well understood and involved a high cost of compliance that
disproportionately affects smaller businesses. Additionally, many small businesses use trusts as an
alternative to external finance which can be hard to access.20
The Board of Taxation Post Implementation Review of Division 7A was presented to the
Government in November 2014. The report has not been publically released; however, in previous
discussion papers the Board recommended five reforms:
 A unified set of rules based on the principle of transfers of value
 a better targeted framework for calculating a company’s profits
 a simpler, more flexible and better targeted system of ‘complying loans’
 greater flexibility for trusts that reinvest unpaid present entitlements (UPEs) as working
capital
 a self-correcting mechanism.21
As many trucking companies are likely to use family trusts and apply Division 7A, the Productivity
Commission should support any move to reduce the complexity and compliance of 7A in order to
improve firm’s ability to reinvest capital and function.
Recommendation 6
The Productivity Commission should investigate the Board of Taxation’s review of Division 7A in
order to allow family trusts to allocate funds in an efficient manner.
Parliamentary Joint Committee on corporations and financial services, Family Businesses in Australia – different and significant: why
they shouldn’t be overlooked, March 2013, accessible at:
http://www.aph.gov.au/~/media/wopapub/senate/committee/corporations_ctte/completed_inquiries/2010_13/fam_bus/report/report_pdf.a
shx, Page 127
19
Board of Taxation, Review of Tax Impediments Facing Small Business A Report to the Government, August 2014, accessible at:
http://taxboard.gov.au/content/reviews_and_consultations/impediments_facing_small_business/report/downloads/taximpediments_repor
t.pdf Page 85
20
Board of Taxation, Review of Tax Impediments Facing Small Business A Report to the Government, August 2014, accessible at:
http://taxboard.gov.au/content/reviews_and_consultations/impediments_facing_small_business/report/downloads/taximpediments_repor
t.pdf Page 85
21
Board of Taxation Post Implementation Review Of Division 7a Of Part III Of The Income Tax Assessment Act 1936 Second
Discussion Paper, March 2014. Accessible at:
http://www.taxboard.gov.au/content/reviews_and_consultations/division_7A/discussion_paper/downloads/discussion_paper_2.pdf,
Page 4
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Capital gains tax
Capital gains tax (CGT) could be preventing the transfer of business ownership to the next
generation. As the Parliamentary Joint Committee commented:
Mr Peter Levi, Managing Director, Co-owner, Colorific Australia, argued
that CGT limits succession options. Mr Levi advised that while it was
possible to transfer the management of the business, CGT effectively
prevented the transfer of business ownership: Certainly in our own
business—we are a 22-year-old business employing around 35 people and
I have both sons in the business—to transition control is one thing; to
transition ownership is another thing altogether. Without going into details,
we have a trust structure, but to transfer part of the business we are subject
to CGT issues. We want to retain control of the business, obviously, and
ownership within the family. Our two boys are coming up and are effectively
managing the business now. One is my second-in-charge—doing a
fantastic job—– and they really deserve to have ownership, but we cannot
afford to be in a CGT situation.22
Previous arrangements for trusts included ‘trust cloning’ where family businesses used to be able
to transfer business assets without triggering a capital gains liability, where a new trust would be
created with the same beneficiaries and terms.23 Cloning was abolished in 2008 as it was seen as
tax avoidance. However, its abolition has increased the presence of CGT and has increased the
tax burden on families wishing to transfer ownership.
The report found that the reality of the high cost of transferring the business asset to their offspring
and the cash flow effect of the large tax bill results in an easier solution of simply transferring the
business to a third party.24 As highlighted in the operator survey responses, there is a concern that
these outcomes will reduce competition in the industry. It should also be noted that deceased
estate transfers are not liable for CGT. The application of CGT on family business transfers has
increased family conflict and made succession planning much harder.25
The Joint Committee stated that CGT implications may be impeding the innovation and planning of
family businesses' succession arrangements and recommended the matter be considered in the
next five years as more data becomes available.26
What should be considered by the Commission is the intent of business taxes. The intent of
business taxes is to collect revenue in the simplest way possible, and in a way that does not
prevent businesses from growing employing more people and contributing to economic growth.
CGT on businesses transferred to offspring works against this. When a parent passes on their
business to the second generation they receive no benefit. They are effectively passing on their
source of income. It is not at all obvious why they should pay CGT out of the family’s pool of
assets.
Parliamentary Joint Committee on corporations and financial services, Family Businesses in Australia – different and significant: why
they shouldn’t be overlooked, March 2013, accessible at:
http://www.aph.gov.au/~/media/wopapub/senate/committee/corporations_ctte/completed_inquiries/2010_13/fam_bus/report/report_pdf.a
shx, Page 144
23
Business Review Weekly, Time running out for many family business trusts, 28 February 2013, accessible at:
http://www.brw.com.au/p/investing/time_running_out_for_many_family_jivQEQzhl6uezXwDVuj6MN
24
Parliamentary Joint Committee on corporations and financial services, Family Businesses in Australia – different and significant: why
they shouldn’t be overlooked, March 2013, accessible at:
http://www.aph.gov.au/~/media/wopapub/senate/committee/corporations_ctte/completed_inquiries/2010_13/fam_bus/report/report_pdf.a
shx, Page 145
25
Parliamentary Joint Committee on corporations and financial services, Family Businesses in Australia – different and significant: why
they shouldn’t be overlooked, March 2013, accessible at:
http://www.aph.gov.au/~/media/wopapub/senate/committee/corporations_ctte/completed_inquiries/2010_13/fam_bus/report/report_pdf.a
shx, Page 145
26
Parliamentary Joint Committee on corporations and financial services, Family Businesses in Australia – different and significant: why
they shouldn’t be overlooked, March 2013, accessible at:
http://www.aph.gov.au/~/media/wopapub/senate/committee/corporations_ctte/completed_inquiries/2010_13/fam_bus/report/report_pdf.a
shx, Page 146
22
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The heir could be liable if they choose to sell the business outside of the family as they are then
benefitting financially from the sale, but a simple change of company ownership within a family
should not be taxed as the original sellers have not financially benefitted.
Recommendation 7
Capital gains tax should not be levied on business ownership transfers within families.
6.7 Improve transparency for business access to finance
Operators in the survey stated that accessing finance and finance reporting had become
increasingly hard to do following the global financial crisis (GFC).
While Australia weathered the GFC, the crisis reduced the number of
providers and increased the cost of finance. SMEs continued to have
access to finance, albeit on less favourable terms. Notably, SMEs
appeared to fare better than large businesses. Lending to large businesses
declined dramatically while lending to SMEs declined more modestly and
recovered more swiftly.27
Funding for small businesses is essential for growth, especially in the trucking industry with new
vehicle purchases or depots being large capital outlays for businesses. Finding funding comes
from a range of sources including internal funding, owner equity, venture capital, secured and
unsecured intermediated credit, and bank bills. Larger businesses can issue corporate bonds and
equity as alternative sources of finance.28
Barriers to accessing finance can have growth limiting effects on small businesses:
The Australian Chamber of Commerce and Industry provided data from
Victoria University's 2010 small business survey which found that
inadequate access to finance was considered a major obstacle to growth
by 16 per cent, and a moderate obstacle by a further 18 per cent, of the
284 businesses surveyed. 29
There is also evidence that many small business turn to higher cost methods of accessing finance
such as credit cards. ‘Heavy reliance on credit card finance also means that business owners are
paying more than double the interest rate charges for credit card finance than a residentiallysecured business loan, which puts significant pressure on small business’.30
As highlighted in the operator survey, lending conditions have become tighter. ‘The reported
changes to lending conditions included increased security requirements, a reduction in the kinds of
security accepted, a decrease in the loan-to-valuation ratio and increased reporting requirements
that included requirements outside the scope of the original loan agreement’.31
Parliamentary Joint Committee on corporations and financial services, Family Businesses in Australia – different and significant: why
they shouldn’t be overlooked, March 2013, accessible at:
http://www.aph.gov.au/~/media/wopapub/senate/committee/corporations_ctte/completed_inquiries/2010_13/fam_bus/report/report_pdf.a
shx, Page 183
28
7 Parliamentary Joint Committee on Corporations and Financial Services - access for small and medium business to finance
29
Parliamentary Joint Committee on Corporations and Financial Services, Access for Small and Medium Business to Finance, April
2011, accessible at:
http://www.aph.gov.au/~/media/wopapub/senate/committee/corporations_ctte/completed_inquiries/2010_13/sme_finance/report/report_
pdf.ashx, Page 8
30
Parliamentary Joint Committee on Corporations and Financial Services, Access for Small and Medium Business to Finance, April
2011, accessible at:
http://www.aph.gov.au/~/media/wopapub/senate/committee/corporations_ctte/completed_inquiries/2010_13/sme_finance/report/report_
pdf.ashx, Page 9
31
Parliamentary Joint Committee on Corporations and Financial Services, Access for Small and Medium Business to Finance, April
2011, accessible at:
http://www.aph.gov.au/~/media/wopapub/senate/committee/corporations_ctte/completed_inquiries/2010_13/sme_finance/report/report_
pdf.ashx, Page 33
27
ATA Submission: Productivity Commission: Business set-up, transfer and
closure
Page 12
AUSTRALIAN TRUCKING ASSOCIATION
Banks are more unwilling to lend without high levels of cash flow and security. There is also a
feeling that banks don’t have enough understanding of the business or its cash flows and ability to
service loans and treat most small business generically.32
This perception of small businesses can be addressed through better awareness of industry and
sector specific pressure by banks. The Parliamentary Joint Committee on Corporations and
Financial recommended the Code of Banking Practice and the Mutual Banking Code of Practice be
amended so there is a standardised notice period for notifying business borrowers of changes to
loan terms and conditions that may affect them.33 This would give businesses a better timeframe to
plan for changes in loan or repayment conditions.
Recommendation 8
The Code of Banking Practice and the Mutual Banking Code of Practice should be amended so
there is a standardised notice period for notifying business borrowers of changes to loan terms and
conditions.
32
Parliamentary Joint Committee on Corporations and Financial Services, Access for Small and Medium Business to Finance, April
2011, accessible at:
http://www.aph.gov.au/~/media/wopapub/senate/committee/corporations_ctte/completed_inquiries/2010_13/sme_finance/report/report_
pdf.ashx, Page 35
33
Parliamentary Joint Committee on Corporations and Financial Services, Access for Small and Medium Business to Finance, April
2011, accessible at:
http://www.aph.gov.au/~/media/wopapub/senate/committee/corporations_ctte/completed_inquiries/2010_13/sme_finance/report/report_
pdf.ashx, Page 38
ATA Submission: Productivity Commission: Business set-up, transfer and
closure
Page 13